CA to buy Niku for $350 million cash

Prudential says $21-a-share deal reasonably valued

By

MichaelPaige

LOS ANGELES (MarketWatch) -- Computer Associates International Inc. on Thursday said it agreed to acquire Niku Corp. for around $350 million in cash in a move to boost its foothold in the fast-growing market for technology governance and service management software.

Under the agreement, Islandia, N.Y.-based CA
CA, +11.99%
will pay $21 for each Niku share
NIKU, -1.29%
The acquisition, expected to close within three months, will slightly dent CA's earnings in fiscal 2006, while adding to them slightly the following year, it said.

The deal represents a 27% premium on Niku's closing price of $16.50 on Wednesday. Shares of Niku shares soared $4.16, or 25.2%, to close Thursday's session at $20.66. CA's stock tacked on 1 cent to $27.01.

Prudential Equity Group analyst Michael Turits said the deal is reasonably valued, given Niku's 45% revenue growth last year and its estimated 25% growth this year.

"With the integration of Niku, CA will be able to deliver the broadest and most comprehensive IT governance and service management solutions on the market to help our customers fully align IT with the business," CA's chief executive, John Swainson, said.

CA said the acquisition would help it gain a critical foothold in the market segment, which is growing faster than the overall software industry.

The company, which has worked to put well publicized accounting scandals behind it, makes tools used by tech managers to monitor and enhance the performance of their computer networks and software,

Prudential's Turits said "the deal makes sense and is consistent with CA's strategy of making tactical acquisitions in key growth areas like security deals and enterprise systems management."

The analyst reiterated in a research note his overweight stance on CA's stock with a target price of $35.

Niku, based in Redwood City, Calif., earned $4 million on sales of $66.3 million in its last fiscal year, ended Jan. 31. It provides software that helps companies keep track of their corporate technology resources.

The two companies already worked together under a pact that saw CA resell and support Niku's flagship Clarity software products which help customers manage the lifecycle of their technology assets.

Niku CEO Joshua Pickus said the combination would provide customers with a one-stop shop for products ranging from strategic planning, project and portfolio management to technology financial management.

Pickus plans to join CA as senior vice president of business service optimization, and the majority of Niku's around 290 are expected to remain after the merger.

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